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The correlation between interest rates and corporate bond yield spreads is a well-known feature of structural bond pricing models. Duffee (1998) argues that this correlation is weak once the effects of call options are removed from the data; a conclusion that contradicts the negative correlation...
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The correlation between interest rates and corporate bond yield spreads is a well-known feature of structural bond pricing models. Duffee (1998) argues that this correlation is weak once the effects of call options are removed from the data; a conclusion that contradicts the negative correlation...
Persistent link: https://www.econbiz.de/10012731144
We employ an intertemporal CAPM (Merton, 1973) framework to examine how exposure to currency risk is priced in foreign equity returns. We identify the fundamental determinants of foreign equity return and foreign currency loadings with respect to the world equity factor and global currency risk...
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Recent theoretical models including the closed-form valuation model of Longstaff and Schwartz (1995) predict that credit spreads are driven by both an asset and interest rate factor. In empirical studies the credit spread may be expressed as either the difference between, or ratio of, the risky...
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